Category: Reinsurance structures · Reviewed by Jake Leat, Associate Director · Last reviewed 2026-06-05
Catastrophe excess of loss reinsurance (cat XL) responds to losses from a single catastrophic event — windstorm, earthquake, flood, terrorism, riot — aggregating across the cedant’s portfolio, above an event retention up to an event limit. It is the principal mechanism by which insurers protect themselves against natural catastrophe and other accumulation risk.
Category: Reinsurance structures Also known as: cat XL, cat excess, catastrophe XL, CatXL Related concepts: excess of loss reinsurance, risk excess of loss, non-proportional reinsurance
Cat XL is triggered by an ‘event’ as defined in the treaty wording — typically a single catastrophic occurrence, often subject to an hours clause (e.g. 72 hours for windstorm, 168 hours for riot, 24 hours for earthquake). All losses arising from the event within the hours clause aggregate to determine the cedant’s loss; if the aggregate exceeds the retention, the cat XL responds up to the limit.
Cat XL is typically structured as a programme of layers above the cedant’s retention, with each layer attaching at a higher point and providing additional capacity. The lowest layer (closest to retention) is the most expensive on a rate-on-line basis; the highest layer (closest to the cedant’s PML — probable maximum loss) is the cheapest.
Cat XL contracts are documented under the Market Reform Contract format, typically including the LMA (Lloyd’s Market Association) standard clauses. The PRA’s Insurance Rulebook requires UK insurers to hold capital against catastrophe risk; cat XL provides Solvency II SCR relief in the catastrophe risk module of the standard formula.
Cat XL placement is typically annual at the principal renewal dates (1 January for European, 1 June for US wind, 1 April for Japan and India). Pricing is informed by catastrophe modelling — proprietary models from RMS (Moody’s RMS), AIR (Verisk) or KCC, supplemented by reinsurer judgement on model uncertainty and current market conditions.
Reinstatement provisions are critical: most cat XL programmes provide one to three reinstatements at pre-agreed rates (typically pro rata as to amount and time), capping the maximum recoverable across the treaty year at limit × (1 + reinstatements).
For UK insurers cat XL is essential to manage windstorm, flood and freeze exposure across the inforce portfolio. Following major events (Storm Daria 1990, Lothar/Martin 1999, Klaus 2009, Daniel/Dudley/Eunice 2022) cat XL rates have stepped up across multiple renewals.
An illustrative example: a UK property insurer purchases a three-layer cat XL programme:
The total programme costs £5.5m of premium for £175m of cover above a £25m retention. Following a £160m windstorm event, the cedant recovers £25m from layer 1, £50m from layer 2 and £60m from layer 3, net of the £25m retention.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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